MMT and ‘monetary crankery’

22 Feb, 2022 at 08:03 | Posted in Economics | 4 Comments

MMTists often like to position themselves as the only ones to properly understand the ‘operational realities’ of modern monetary systems. Ironically, many of the claims made by MMTists on this topic are misleading at best. One common rhetorical tactic that I’ve noticed they employ, which often catches their critics out, is to use the term ‘government’ in a way that’s different typically from how it is used in mainstream economics. When they say ‘government’, they tend to include basically any institution that is an agent of the state, including the central bank — hence the ‘government’ here includes consolidating the treasury and the central bank into one entity, effectively ignoring or assuming away any independence the central bank may have.

Upholding Economics

Modern Money Theory by Wray, L. Randall (ebook)Effectively “ignoring or assuming away any independence the central bank may have”? That is strange indeed: Last — just to take one example — I had a look in L. Randall Wray’s Modern Money Theory there were more than fifty pages devoted to “technical details of central bank and treasury coordination” and diverse fiscal operations of the Fed and the Treasury. Guess we have to go looking for ‘bad monetary crankery’ somewhere else …


  1. I take no particular brief for MMT. The array of institutions that must provide public services in managing a fiat money cum credit system extend well beyond CB and Treasury. Touting the “independence” of a CB while scarcely acknowledging the full array is close to naked reactionary ideology. That a CB is liable to hijack by corrupt, private interests is a more serious hazard than public use by democratic institutions — if that is MMT’s naïveté, I do not scorn them.
    The whole discourse around the public use of the public good of money is degraded and forlorn. I only wish MMT was less interested in taking intellectual prisoners among PhD’s who could not work out the faults in, say, “flow of funds” (e.g. Krugman)

  2. When Federal Government do their end of year Financial Statements all govt agencies and departmental accounts are consolidated into one consolidated report. From an accounting perspective it is correct to think on terms of consolidated govt. As for Treasury working with the RBA coordination is essential. Open market operations for liquidity management is based on Treasury’s injections and withdrawals of money into the system. If RBA didn’t work in with the Treasury they would lose control of target cash rate. I could go on with further examples but undoubtedly you wouldn’t appreciate them.

  3. Remember when Trump bullied Powell into lowering rates, but now hedge fund Treasury shorts have bullied Powell into raising rates?

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